Earnings stock to watch: Tencent Music Entertainment Group – ADR (NYSE: TME)

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Tencent Music Entertainment Group – ADR (NYSE: TME) stock rose over 1.5% on 12th May, 2020 (As of 10:19 am GMT-4 ; Source: Google finance) after the company posted decent results for the first quarter of FY 20 mainly fueled by robust growth from online music subscription revenues.. The monthly average revenue per subscriber paying for the company’s social entertainment services declined 13% in the first quarter of 2020. These services included karaoke platform “WeSing” and “Kugou Live”, where users live-stream music performances and concerts. However, the number of paying users in the segment rose 18.5% to 12.8 million. The growth is picking up in the second quarter even as monthly average user numbers may normalise with people heading back to work and having less leisure time. Overall the company has reported Non-IFRS net profit attributable to equity holders of the Company of RMB1.10 billion (US$156 million) for the first quarter of 2020, compared to RMB1.20 billion in the same period of 2019. At the end of March, 2020, the combined balance of the Company’s cash, cash equivalents and term deposits amounted to RMB21.90 billion (US$3.09 billion), compared to RMB22.93 billion as of December 31, 2019.

Moreover, online music paying users reached 42.7 million in the first quarter of 2020, which represents the growth of 50.4% year-over-year with underlying paying ratio reaching 6.5%, up from 4.3% for the same quarter last year. The revenues from online music services for the first quarter of 2020 rose by 27.4% to RMB2.04 billion (US$289 million) from RMB1.61 billion in the same period of 2019. This rise was due to strong growth in music subscription revenues, supplemented by growth in advertising service revenues, partially offset by decrease in sublicensing revenues. The revenues from social entertainment services and others for the first quarter of 2020 rose by 3.3% to RMB4.27 billion (US$603 million) from RMB4.13 billion in the same period of 2019. On a year-over-year basis, the paying user base of social entertainment services have risen by 18.5%.

TME in the first quarter of FY 20 has reported the adjusted earnings of 0.66 yuan, beating the analysts’ estimates for the adjusted earnings per share of 0.63 yuan, according to Refinitiv Ibes Estimate. The company had reported the adjusted revenue growth of 10 percent to Rmb 6.31 Billion in the first quarter of FY 20, missing the analysts’ estimates for revenue of Rmb 6.33 Billion.  The company has delivered the operating profit of RMB1.05 billion (US$148 million) in the first quarter of 2020, compared to operating profit of RMB1.15 billion in the same period of 2019.

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